It’s smart to know the pros and cons of COBRA health insurance, how much it costs, how to qualify, the deadlines and alternatives to consider.
COBRA, which stands for the Consolidated Omnibus Budget Reconciliation Act, is a federal law enacted in 1986. COBRA allows employees and their families to continue their group health insurance coverage for a limited period after experiencing a qualifying event that would otherwise result in the loss of coverage. Such events include job loss, reduction in work hours, transition between jobs, death, divorce, and other life events.
Who is Eligible for COBRA Coverage?
Eligibility for COBRA coverage applies to, 1. Employees who were enrolled in their employer’s health plan when a qualifying event occurred; 2. Spouses of covered employees who experience a qualifying event; and 3. Dependent children are covered under the employee’s health plan before the qualifying event.
How Does It Work?
COBRA allows eligible individuals to maintain the same health insurance coverage they had while employed. When the qualifying event occurs, the employer must notify the health plan administrator within 30 days. The plan administrator then has 14 days to inform the eligible individual of their COBRA rights.
The eligible individual then has 60 days to decide whether to elect COBRA coverage, which typically lasts up to 18 months but can be extended to 36 months under certain circumstances.
While COBRA allows for the continuation of coverage, it does not subsidize the cost. Individuals are responsible to pay the full premium, including the portion previously covered by the employer, along with a 2% administrative fee.
What Are the Key Benefits of COBRA Insurance?
While the drawbacks of COBRA coverage should be considered, so should the benefits. COBRA ensures that individuals do not experience a gap in health insurance coverage, allowing them to continue to receive care without interruption. It also provides the same health insurance coverage as before the qualifying event, including the same network of doctors and specialists.
What Does COBRA Insurance Cost?
It’s important to understand the associated costs that come with this essential coverage. Generally, the former employee picks up the entirety of the cost for the insurance coverage, was $7,739 on average for a single coverage for an employer-sponsored health plan in 2021, coming to a monthly cost of $645 to continue the group health insurance coverage via COBRA, according to the Kaiser Family Foundation.
For family coverage, the average annual cost was $22,221, translating to $1,852 per month without employer assistance. These estimates do not include a possible 2% administrative fee.
How Journey Payroll & HR Supports COBRA Compliance
COBRA insurance is a critical safety net for employees who lose their health coverage due to job loss or other qualifying events. Understanding how COBRA works and the responsibilities involved is essential for both employers and employees. Journey Payroll & HR provides the support and expertise needed to manage COBRA compliance effectively. For more information or assistance with COBRA insurance, please contact us. We are here to help you every step of the way.
